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A US Second Circuit decision questions whether US states can subject foreign corporations to the general jurisdiction of their courts as a condition of registering to do business in the state

When a foreign corporation wishes to “do business” in a US state, it is required to register in that state (by obtaining a “certificate of authority”) and appoint an in-state agent to accept service of process. The registration statutes of some US states expressly require or, as in New York, have been interpreted by the courts to require, that the foreign corporation, as a condition of registration, consent to the general personal jurisdiction of the state’s courts. Being subject to the general jurisdiction of a state’s courts is no small matter because it means that, instead of being subject to suit in the forum state (ie, the state where the action is brought) only for claims arising from the corporation’s forum-related conduct (specific jurisdiction), the corporation can be sued for claims that do not arise from its forum-related conduct (general jurisdiction). General jurisdiction has also been referred to as “all purpose” jurisdiction to convey that it means that one subject to it can be sued in the forum for all purposes, not just transactions or conduct related to the particular state.

Brown v. Lockheed Martin Corporation

In February of this year, a three-judge panel of the US Court of Appeals for the Second Circuit in New York issued a decision in Brown v. Lockheed Martin, 2016 WL 641392 (2d Cir. Feb. 18, 2016), in which the court questioned (but did not decide) the validity of registration statutes that condition registration upon the foreign corporation’s consent to general jurisdiction in light of the US Supreme Court’s oft-discussed 2014 decision in Daimler v. AG Bauman. In Daimler, the Supreme Court clarified that a corporate defendant is subject to general jurisdiction only where the corporation is “fairly regarded at home,” which means (1) its place of incorporation; (2) its principal place of business; or (3) in the extraordinary case, where the corporation’s contacts with the forum state are so “continuous and systematic” that it is essentially “at home” there. It is worth noting that a foreign corporation’s contacts with the forum state rarely would be so “continuous and systematic” that it could be considered

“at home” there. The lone example of such a scenario cited by the Daimler court involved a Philippine corporation that had relocated its headquarters during wartime such that the forum became the corporation’s principal, albeit temporary, place of business.

Cindy S. Brown, acting as the personal representative of her late father’s estate, brought the action against the global aerospace company Lockheed Martin Corporation (“Lockheed”) and others in Connecticut federal court to recover for asbestos-exposure injuries that her father, an Air Force airplane mechanic, suffered at locations outside of Connecticut. Lockheed, which is incorporated and has its principal place of business in Maryland, at relevant times leased offices and employed 30 to 70 workers in Connecticut. Lockheed also was registered to do business and had appointed an agent for service of process in Connecticut pursuant to that state’s business registration statute.

Lockheed successfully moved to dismiss on the ground that it was not subject to personal jurisdiction in Connecticut. Specific jurisdiction was not an issue in the case because the incidents of decedent’s asbestos exposure occurred outside of Connecticut and, therefore, the plaintiff’s claims could not have arisen out of Lockheed’s contacts (if any) with Connecticut.

On the plaintiff’s appeal to the Second Circuit, the court concluded that Lockheed’s business contacts with Connecticut were insufficient, in the context of Lockheed’s overall activity, for the company to be considered “at home” in Connecticut.

The court also considered whether Lockheed had consented to general jurisdiction in Connecticut; registering to do business and appointing an agent for service of process in the state. Lockheed argued that it could have consented only to specific jurisdiction – not general jurisdiction – under the registration statute, which did not expressly condition registration upon the corporation’s consent to general jurisdiction. The court, differentiating “Connecticut’s registration statute from others that have been definitively construed to convey a foreign corporation’s consent to general jurisdiction”, concluded that the Connecticut registration statute did not require Lockheed to consent to general jurisdiction as a condition of registration.

Importantly, however, the court observed that, even if the Connecticut registration statute had required the foreign corporation to consent to general jurisdiction as a condition of registration, it is questionable whether such consent could validly confer general jurisdiction, in light of Daimler, if the corporation is not “at home” in Connecticut. The court noted that, although a defendant may ordinarily consent to a court’s jurisdiction (for example, in a contract), it pointedly left open the question of “whether consent to general jurisdiction via a registration statute would be similarly effective notwithstanding Daimler’s strong admonition against the expansive exercise of general jurisdiction.”

Conclusion

The US Supreme Court’s Daimler decision will continue to alter the jurisdictional landscape in US courts. The Brown decision is an indication that there may be a compelling argument that a state, such as New York, cannot compel a foreign corporation to consent to general jurisdiction as a condition of registration without violating the Due Process clause of the US Constitution.

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